CONFIDENTIAL

MIA QE MARCH 2012

QUESTION 1

Set 4(a)
Business income
Profit before taxation
Cost of sales
Less:
Dividends
Interest
Late payment
FD interest
Rent
Insurance recovery (keyman policy on director)
Insurance recovery of fixed assets
Insurance recovery (stocks)
Add/Less:
Salaries and wages
Disabled employees
Interest on borrowings for investment
Interest for working capital
Late payment charges for goods
Entertainment
Company annual dinner
Entertainment expenditure disbursement
Family day
Entertainment expenditure wholly for sales
Depreciation
Repair and maintenance
Bad and doubtful debts
Bad debts written off
General bad debts provision
Specific provision
Motor vehicle expenses
Repairs and maintenance
Compound and fines
Lease charges
Trailer
Motor car (max= RM50,000)
Advertisement (billboards)
Others
Professional fees
Termination of supply contract
Bad debts recovery
Lease arrangement for motor vehicles
Promotion expenses

Note

Add (+) Deduct(-)

RM000 RM000

RM000
103,133

Nil
4
90
36
Nil
0

2
3
4
4
4

5
24
6

3
Nil
Nil

8
9

Nil
90
Nil
Nil
609
Nil
Nil
987
Nil

10
Nil
30

11

Nil
15
800
Nil

12
Nil
Nil
Nil
Nil

(135)
102,998

CONFIDENTIAL

MIA QE MARCH 2012

Insurance
Key man policy (endowment)
Key man policy (life)
Marine insurance of cargo import
Others
Foreign exchange loss
Unrealized loss
Realized loss
Donation -library facilities
Library facilities
Other donations

14
2
Nil
5
Nil
15

16

3
Nil
Nil
5
5
2,549

Add
Less
Adjusted income from business
Less: Capital allowance
Statutory income
Add: Other income
Dividend - deemed total income (see below)
Interest - exempted
Rent (net)
Aggregate
income
Less: Donation (restricted to 10% of Aggregate income)
Total income
Add: Dividend
Less: Interest
[Deemed total income-Sec 53 Transitional provisions)
Chargeable income

Nil
Nil
90

29

102,998
2,549
105,547
(29)
105,518
(640)
104,878

90
104,968
5
104,963

5
3
2

2
104,965
(46 = 13 marks)

Explanation of tax treatment

1(b)(i)

Insurance recovery (Note 4)

Insurance policies taken to cover any possible losses that may arise in the course of
carrying on a business would be allowable and the recoveries taxed accordingly [Section
22 Income Tax Act 1967 (as amended) ].

In the case of an individual in the employ of the company and whose disablement or
death would result in a significant reduction of the companys income and/or profit would
be allowable, if it has no element of investment, and the recoveries, if any, would be
taxable.

CONFIDENTIAL

MIA QE MARCH 2012

The premium payable on a term life policy or an accident policy of key-man insurance is
allowable as a deduction against gross income from a business since it has no element of
investment. On the other hand, the premium payable on a whole life or an endowment
policy or on the director of a controlled company is NOT allowable in arriving at the
adjusted income from a business of a company as it has an element of investment.

The proceeds receivable on a term life policy or an accident policy is taxable on the
employer or the company. On the other hand, the proceeds receivable in connection with
a whole life or an endowment policy is not taxable as the insurance premium has not
been allowed.

Law Section 22(1); Public Ruling No 2-2003

(4 = 2 marks)
1(b)(ii)

Salary and wages (Note 5)

The salary paid to the disabled persons qualifies for a double deduction.

The payment of the EPF contributions on the salaries of the management staff is
restricted to 19% of the remuneration, and the balance is not an allowable expenses.

The free trips for the management staff while it is an expenditure incurred in the course of
the business, is not an allowable deduction.
Law:
Section 33 and 39(1)(m) Income Tax Act 1967 (as amended)
Income Tax (Deduction for the Employment of Disabled Persons) Rules 1982.
(4 = 2 marks)

1(b)(iii)
The treatment for the entertainment expenditure is as follows:

Company annual dinner

This is fully allowed.

Entertainment expenditure disbursement

50% of this expenditure is restricted

Family day
The expenditure is fully deductible in arriving at the adjusted income

Entertainment expenditure wholly for sales

Expenditure incurred wholly for sales is fully deductible

50

180

79

352
. (4 = 2 marks)

CONFIDENTIAL
1(b)(iv)

MIA QE MARCH 2012

Motor vehicle expenses (Note 10)

Repairs and maintenance are fully deductible being incurred wholly and exclusively in the
production of gross income.

On the other hand, deduction will not be allowed for the compound and fines paid for
various traffic offences as these are expenditures incurred for breaking the law
[Alexander von Glenn].

The lease charges would be fully allowed where the lease rental paid is in respect of a
motor vehicle licensed by the appropriate authority for the transportation of goods and
passengers. In any other case, the maximum amount allowed for a deduction is
RM50,000 [Section 39(1)(k)].

But if the motor vehicle has not been used by any person for any purposes prior to the
rental and the total cost of the motor vehicle exceeds RM150,000, then any sum paid by
way of rental in excess of RM50,000 would be disallowed [ proviso to Section 39(1)(k)].
(4 = 2 marks)

1(b)(v)

Donation (Note 16)

The company would be given a deduction in an amount equal to the expenditure incurred
by the company in the relevant period on the provision of library facilities which are
accessible to the public and in respect of contribution to public libraries and libraries of
schools and institutions of higher education.

The amount qualifying for a deduction under section 34(6) is RM100,000

the balance of any excess would be disallowed.

Donations to approved institutions are allowed a deduction but such deductions are
restricted to 10% of the aggregate income of the company.
Law:
Section 34(6)((g) Income Tax Act 1967 (as amended)
(4 = 2 marks)
(Total: 23 marks)

CONFIDENTIAL

MIA QE MARCH 2012

QUESTION 2
(a) Computation of qualifying industrial building expenditure
Year of assessment 2011
Qualifying industrial building expenditure
Expenditure
Cost of land
Legal fee for transfer of land
Clearing of land
Cutting and leveling land
Excavation and preparation of site for construction
Piling and foundation works for building
Construction of building
Construction of perimeter wall
Architect fee-building
Legal services for obtaining various building approval
Subcontract charges for wiring and plumbing works
Landscaping charges
Total qualifying building expenditure

RM
NQ
NQ
NQ
NQ
66,420
118,900
295,200
28,700
114,800
53,300
60,680
NQ
738,000
(12 = 5 marks)

(b) Computation of Industrial Building Allowance

Year of assessment 2011
Qualifying expenditure
Less:
IA
10'%
73,800
AA
3'%
22,140
Residual expenditure c/f

738,000
95,940
642,060
(5 = 2 marks)
(Total: 7 marks)

CONFIDENTIAL

MIA QE MARCH 2012

QUESTION 3
Business income
Memberships subscription fees
Less: Prop of common expenses
Adjusted income
Less: Prop of Capital allowance
Statutory income
Seminar
Seminar fees
Less: Direct expenses
Speaker fees
Rental of seminar hall
Prop of common expenses
Adjusted income
Prop. of capital allowance

RM

RM

RM
118,300
46,570
71,730
668
71,062

59,150
10,080
5,000
23,285

(38,365)
20,785
(334)

Dragon Dance
Dragon Dance
35,000
Less:
Dragon dance expenses
14,700
Prop of common expenses
13,778
(28,478)
Adjusted income
6,522
Less: Prop of capital allowance
(198)
Statutory income
Aggregate of statutory income from business
Less: Amount exempted
Aggregate of SI from business after exemption
Dividend
8,000
Interest
1,400
Aggregate income
Less: Donation
Total income
Tax
Tax charged on the first
35,000
Tax charged on the balance
200 at 15%
35,200
Less: Sec. 110 set off (8,000 x 25%)
Tax payable

20,451

6,324
97,837
(71,062)
26,775
9,400
36,175
(975)
35,200
RM
2,025.00
30.00
2,055.00
(2,000)
55.00

CONFIDENTIAL

MIA QE MARCH 2012

Working
Gross income from business
Memberships subscription fees
Seminar fees
Dragon dance
Total gross income from business

RM
118,300
59,150
35,000
212,450

Common expenses
Salary and wages
EPF
Stationery
Utility expenses
Painting of premises
Quit rent
Assessment
Total common expenses

RM
60,480
7,862
6,048
5,040
2,590
403
1,210
83,633

Common expenses attributable to memberships' subscription fees

[Membership sub. fees/Gross income ] x common expense
118,300/212,450 x 83,633 = 46,570
Common expenses attributable to seminar fees
[Seminar fees /Gross income ] x common expenses
59,150/212,450 x 83,633 = 23,285
Common expenses attributable to 'Dragon Dance'
['Dragon dance' /Gross income ] x common expenses
35,000/212,450 x 83,633 = 13,778
Common capital allowance attributable to memberships' subscription fees
[Memberships sub. fees/Gross income ] x Capital allowance
118,300/212,450 x 1200 = 468
Common capital allowance attributable to seminar fees
[Seminar fees/Gross income ] x Capital allowance
59,150/212,450 x 1,200 = 334
Common capital allowance attributable to 'Dragon Dance'
[Dragon dance /Gross income ] x Capital allowance
35,000 /212,450 x 1,200 = 198
(Total: 20 marks)

CONFIDENTIAL
QUESTION 4

MIA QE MARCH 2012

A) (a) Computation of Statutory Employment Income of

assessment 2011:
RM
Section 13(1)(a):
Salary (30000 x 12)
360,000
Bonus (30000 x 2)
60,000
Interest on loan (12,000 4,000)
8,000
Prize i-pad (exempt)
Nil
Hamper
500
School fees
24,000
Refund of Professional fees
650
Utilities bills
8,600
Section 13(1)(b):
Car (prescribed value)
Fuel (exempt)
Driver (prescribed value) (600 x 12)
Servant (400 x 12)
Furniture (prescribed value)
Mobile phone (exempt)
Subscription for corporate
membership entrance fee (exempt)
Subscription fee

9,000
Nil
7,200
4,800
3,360
Exempt
Nil

RM

461,750

6,000

Section 13(1)(c):
Defined value 3,500 x 12 = 42,000
or 30% Sec 13(i) (a) 30% x 461,750 = 138,525
Take the lower
Gross Employment income
Less: professional fees
Adjusted / Statutory income

Encik Adam for the year of

30,360

42,000

534,110
(650)
533,460
(27/ x 1/3 = 9 marks)

CONFIDENTIAL
(b)
Income from Malaysia
:
Business
Employment
Dividend:
Malaysia (exempt)
Singapore (exempt)
Rental Singapore (exempt)

MIA QE MARCH 2012

9
Adam
RM

Anis
RM

533,460

Nil
Nil

Nil

Aggregate income

533,460

Approved donations
Total income
Personal reliefs:
Self
Child:
First
Second
Books (max)
EPF (max)
Medical insurance (max)

(3,000)
530,460

9,000

4,000
1,000
1,000
6,000
3,000
(24,000)
506,460

15%
75,969

Chargeable income
Tax chargeable at special rate / flat rate
Income tax payable

(21/ x 1/3 = 7 marks)

B) The tax implication if Adam was not resident:
- He is subject to tax a flat rate of 26% /
- He is not entitled for personal reliefs under section 46, 48 and 49. /
2 x 1/2 = 1 marks)
C) The chargeability of RM20,000 director fee received by Encik Adam which was credited
into his bank account in Singapore:
- RM20,000 is subject to Malaysian tax /. The director fee is considered as income
derived from Malaysia, as it was paid by a resident company in Malaysia /. The
company is deemed resident in Malaysia by virtue of section 8(1)(b) as the board of
directors meeting was held in Malaysia /. The fact that the amount was credited into
his account in Singapore does not affect the taxability of the director fee in Malaysia.
(4/ x = 2 marks)

CONFIDENTIAL
10
MIA QE MARCH 2012
D) The statutory requirement in relation to the notification of chargeability of the
employment income derived from Malaysia:
- Encik Adam must inform the IRBM in writing of his chargeability to tax within two
months from his arrival in Malaysia S.77(3) /
- Submit tax return form BE for the year of assessment 2011 latest by 30 April
2012. /
(2/ x 1 = 2 marks)
(Total: 21 marks)

QUESTION 5
A) YEAR ENDED
31 December

2011
RM000

2012
RM000

2013
RM000

Promoted Product:
Adjusted income
Capital allowance:
Brought forward
Current year
Statutory income
70% exemption /
Deemed total income

18,000

10,000

[8,000]
[4,000]
- Nil
- Nil

[12,000]
[4,000]
2,000
[1,400]
600

[4,800]
5,200
[3,640]
1,560

Non-promoted product:
Statutory income
Adjusted loss b/f
Statutory income from business
Interest income
Aggregate income
Approved donations
Total income
Deemed total income
Chargeable income

1,000
[800]/
200
15/
215
[12] Nil
203
203/

600
600/

1,560
1,560/

1,400
[600]/
[800]/
cf5,200
- Nil

3,640
[400]/
[3,240]/
cf 1960
- Nil

Exempt income:
70% exemption
Non-promoted product losses cy
Promoted product losses - current year b/f
Credited into exempt income account

Nil

CONFIDENTIAL
Workings on capital allowance:
31 December
Plant and machinery:
Initial allowance 20%
Annual allowance 20%
Total

MIA QE MARCH 2012

11
2010
RM000

2011
RM000

2012
RM000

2013
RM000

4,000
4,000
8,000

4,000
4,000

4,000
4,000

400
4,400
4,800

Unabsorbed losses to be carried forward:

RM6,000,000 RM800,000 RM3,240,000 = RM1,960,000 ///
(27 Nil x 1/3 = 9 marks)
B) (1)
The company is categorised as taxable person under group G i.e. other service
providers as consultancy services as included in taxable services provided under
group G /.
ii) The service tax rate is 6% on the value of taxable services rendered to customers /.

iii) The STA 1975 stipulates six taxable periods whereby a taxable person has to remit
the service tax amount collected from the taxable services within 28 days from the
taxable period as follows:

i)

Tayable Period
January February
March - April
May - June
July - August
September - October
November - December

Payment due by:

28 March
28 May
28 July
28 September
28 November
28 January of the following year

iv) 10% penalty will be imposed on the unpaid amount if RMI Sdn Bhd fails to remit the
amount of service tax collected to RMCD. The maximum penalty imposed is 50%. /
(8/ x = 4 marks)
B) (2)

RMI is subjected to withholding tax of 10% under the Special Classes of income S.4A from
the gross payment made to its Australian counterpart as follows:

Gross payment
WHT 10% S. 109B

Net payment to Australian company

RM
100,000
[10,000] / - remit to IRBM within one month
from the date of payment to Australian
company
90,000 /
(4 x 1/2 = 2 marks)
(Total: 15 marks)

CONFIDENTIAL
QUESTION 6

12

MIA QE MARCH 2012

A)

Tax avoidance is the act of deferring, minimizing and exclusion of income tax within
the ambit of the tax laws /, such as utilizing the tax incentives and personal reliefs
provided in the tax laws /.
Tax evasion is the act of evading of income using illegal means /, such as under
reporting of income and manipulating of business records with intention to eliminate
the income tax liabilities /.
(4 /x 1 = 4 marks)
B) (1) Road transport business:

- The business income and non-business income derived from Malaysia will be
subjected to tax on a derivation basis i.e. the company is only taxable on income
derived from Malaysia .
- Whereas, income derived from outside Malaysia is exempted from income tax .
(2) Air transport business:
-

The income derived by air transport business from Malaysia and outside
Malaysia are subjected to world income basis i.e. chargeable to tax on income
from wherever derived irrespective whether the income is remitted or not to
Malaysia.

Whereas, income from other sources (other business and other income) are
chargeable to tax on derivation basis i.e. chargeable to tax on income derived
from Malaysia.

Foreign source income from non-air transport business is only taxable in

Malaysia upon remittance of the income into Malaysia .
(8 x = 4 marks)

C)
i)

The exemption available on the disposable of chargeable assets are:

- For an individual, the exemption available is 10% of the chargeable gain or
RM10,000 whichever is higher .
- For a company, no exemption is available. Hence the RPGT payable is 5%
on chargeable gain .
(2/ x 1 = 2 marks)

ii)

Losses incurred when the disposal price is less than the acquisition price . The
amount of losses can be absorbed from the chargeable gain derived from the
disposal of other chargeable assets . Any unabsorbed losses can be carried
forward to be offset against future chargeable gain but it cannot be carried
backward.
(4 x = 2 marks)

CONFIDENTIAL
13
MIA QE MARCH 2012
iii)
Criteria for an individual to be given full exemption under S.8 of RPGT Act 1976:
The individual must be citizen or permanent resident of Malaysia.
The real property is owned by the individual, his spouse or jointly owned by them.

The real property must be residential property or part of the building is used for
residence (either occupied by the owner or rented out).
The exemption is only available once in a life time.
(4 x 1/2 = 2 marks)
(Total: 14 marks)